woman with red beanie thinking about paying off student loans

A MoneyTips Guide to Paying Off Student Loans


What You Need To Know

  • When it comes to paying off student loans, you’ve got options (like consolidating or refinancing to lower your interest rate)
  • The average repayment term for most student loan debt is 20 years
  • Depending on whether your student loan is federal or private, what you pay in interest will vary


Show of hands if you’ve heard this before: “Your college years are the best years of your life!” Looking back at that time – and looking ahead to life in “the real world” – you might get nostalgic, especially when those student loan payment notifications start to kick in.

You may be wondering if that summer abroad was really worth the 30-year student loan repayment plan you signed up for.

Student loan debt can create a serious sense of financial insecurity, but we think this MoneyTips guide to paying off student loans will take some of that stress away, offering insight into student loan debt and helping you figure out a solid repayment strategy.

Types of Student Loans

There are three types of student loans: private, federal and refinance loans. You may have a combination of these loans.

Federal student loans

Most students opt for federal student loans because they include lots of benefits, and most of them don’t require a co-signer or good credit. 

  • Direct subsidized and unsubsidized loans
  • Perkins loans
  • Direct PLUS loans
  • Direct consolidation loans

Private student loans

Private student loans are useful for specific circumstances, like covering costs associated with a bar exam or to support international students.

  • Bar exam loans
  • Credit union loans
  • Medical school loans
  • International student loans

Refinancing Loans

Refinance loans are an option after you’ve graduated and started paying down your debt. When you refinance, a new lender pays off your existing loan(s) and gives you a new loan that comes with a new monthly payment repayment schedule at a different (usually lower) interest rate.

  • Parent PLUS refinance loans
  • Medical school refinance loans (during and after residency)
  • Medical school refinance loans (after residency)

How To Pay Off Student Loans

When it comes to paying off debt, there is no one-size-fits-all approach. You can make the minimum monthly payments, but it could take you longer to pay it off, and it might cost you more in interest over the loan’s term. 

Take a moment to consider your unique situation and explore some money moves that could help.

  • Think about what you owe and select a repayment plan.
  • If you can afford it, pay off student loans with higher interest rates first.
  • Track all of your spending to make sure you’re not going over budget.
  • Contribute more than the minimum monthly payment to help pay down the principal.

Student Loan FAQs

Before you sign on a dotted line to take out a student loan or to refinance your loans, it pays to learn some key details. 

How does student loan interest work?

Interest is a charge added to your balance for the privilege of borrowing money. 

There are two types of interest: variable and fixed. The main difference between these two rates is that a fixed rate will stay the same throughout your loan term, while a variable rate will fluctuate with market changes. Federal student loans only offer fixed interest rates, which Congress determines each year.

Private student loans offer a choice between variable and fixed interest rates that are determined by market factors, as well as variables that are specific to the borrower and their co-signer (if they have one). This includes credit, income and employment history. 

The interest rate on some private student loans can be as high as 12%, making them much less competitive than federal loan options. 

How long does it take to pay off student loans?

The amount of time it will take you to pay off student loans depends on how much debt you’re juggling and your repayment term. The average repayment term for most student loan debt is 20 years. But other factors can play a role in this timeline, including whether you refinance your loans or consolidate debt. These options can shorten or stretch the length of repayment.

What are student loan suspensions?

Student loan suspensions (aka loan forbearance) temporarily “suspends” your student loan payments.

Under most circumstances, interest continues to be charged on your balance(s). But there are instances when this may not be the case – like when the government suspends your student loans.

Federal student loan payments have been suspended since March 13, 2020, because of the coronavirus pandemic and its unprecedented economic toll. Monthly payments on federal student loans, including any accrued interest, have been waived until August 31, 2022.[1]

If you’ve got federal loans, you don’t have to pay them and they aren’t collecting interest during the suspension. Unfortunately, private loan holders aren’t eligible for this payment suspension.

What is student loan deferment?

Life happens sometimes. And depending on your financial situation, student loan payments may be hard to make. Thankfully, there are options to pause your student loan payments without hurting your credit score. 

You can try and defer your loans (aka put them on hold) until you’re able to afford payments again. With deferment, your loans will keep accumulating interest, so you may be better off considering an income-based repayment plan.

What is a grace period?

Good news! After graduating, you’ll get some breathing room to figure out the whole adulting thing and how your student loans will fit into your new life and your budget. It’s what’s known as a grace period

Grace periods typically last up to a year after you graduate. Interest may be added to your balance during the grace period, but you’re not obligated to make monthly payments during this time. But … if you have some extra money, it doesn’t hurt to start making payments right out the gate!

Is student loan forgiveness possible?

For some borrowers, the answer is yes – student loan forgiveness is possible. Student loan forgiveness wipes away all or a portion of your loan(s), and you’re no longer obligated to pay back the amount that’s been forgiven. However, depending on how the loan is forgiven, there may be tax consequences.

If you’ve got a qualifying public service job (like teaching, nursing, firefighting, etc.), the Public Service Loan Forgiveness (PSLF) program will forgive the remaining balance of your federal loans after you’ve made payments for at least 10 years. 

It might be worth it to read up on the changes to the PSLF program[2] and seek advice from a qualified tax professional to see if forgiveness is a smart move for you.

Student Loans: A Necessary Evil?

You might spend your first few post-graduate, adult years wondering if all these student loans were worth it. Hopefully, you’ll come to recognize how beneficial they were in the long run. 

While the “long run” may feel a long way away, completely paying off your student loans is possible. It all depends on finding the solution and payment plan that works best for you.

  1. U.S. Department of Education. “Biden-Harris Administration Extends Student Loan Pause Through August 31.” Retrieved April 2022 from https://www.ed.gov/news/press-releases/biden-harris-administration-extends-student-loan-pause-through-august-31

  2. Federal Student Aid. “Public Service Loan Forgiveness Limited Waiver Opportunity.” Retrieved October 2021 from https://studentaid.gov/announcements-events/pslf-limited-waiver


In Case You Missed It

  1. There are three types of student loans, each with their own benefits and regulations

  2. You can take advantage of interest-free payment periods to save money and pay off your loans faster

  3. You have options if you need to pause your student loans. Do your research to find out what makes sense for you

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